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LAST WEEK, I WROTE HERE THAT the stage was set for a decline in stocks, but the bears had not stepped up to drive the market lower. Monday, when the Dow Jones Industrial Average lost 289 points, it appeared that they had finally taken charge. But given the lack of follow-through on Tuesday and Wednesday, we cannot really be sure.

Let's recap both sides of the ledger and see where the bullish and bearish technical evidence is stronger. From my point of view, it still favors the bears.

Friday, the Standard & Poor's 500 touched resistance at 875 before backing down a bit (see Chart 1). Monday, it moved below the rising trendline that described the rally from March 6. Since both of these conditions are still in place, we have two entries on the bearish side.

Chart 1

Many chart watchers, including yours truly, have also been following the progress of a chart formation called a "rising wedge." After a rally, the appearance of this pattern is usually bearish, and if prices move below its lower border we get a sell signal. That also happened Monday so we add another entry on the bearish side.

Without rehashing old columns, volume declined throughout the rally as a warning signal and nothing has changed on that front. The only major volume surge since March happened Monday when the market fell, so I'll take that as another negative for the market.

On the bullish side, the simple fact that the market has not exhibited more than just a few cracks is testament to the power of the rally. Until the trend actually turns and we have more than a few days of declines in a row, an elusive occurrence in recent weeks, we cannot declare control for the bears. They still have not proved that they have enough power to take prices significantly lower at this time.

Making this a more significant event was that the ETF was able to bounce off both a support level and a trendline. In other words, buyers came back to scoop up perceived cheap shares. Demand was still there.

Outside of the stock market, there are other factors to put into the mix. For example, the U.S. dollar has exhibited strength when stocks were in trouble. Investors seemed to flock to a perceived safe haven during most of the bear market and did the opposite when stocks looked better. Right now, the U.S. Dollar Index is in a five-week uptrend (see Chart 3).

Chart 3

This is not a stand-alone reason to sell stocks, but it does go on the negative side of the ledger.

Crude oil is another market where ups and downs have coincided directly with stocks' ups and downs. In the past, oil has been negatively correlated with stocks as higher oil prices are perceived to be an economic drag. But after last year's collapse in both markets, rising oil suggests rising demand from the economy and that is taken as a positive for stocks.

Crude oil bottomed in February roughly three weeks before stocks did. And it topped roughly three weeks before last week's potential top in stocks. If the relationship continues to hold, then we give this to the bears, too.

In conclusion, there is more evidence on the bearish side, but the bullish side has some compelling arguments, too. Price action takes precedence over all other supporting technicals such as volume, momentum and sentiment. It is the total number of negative conditions still in place that keeps me leaning bearish.

Getting Technical Mailbag:Send your questions on technical analysis to us atonline.editors@barrons.com. We'll cover as many as we can, but please remember that we cannot give investment advice.

Michael Kahn, author of three books on technical analysis, former Chief Technical Analyst for BridgeNews and former director for the Market Technicians Association, also blogs at www.quicktakespro.com/blog.